2005 Economic Stats:An Indepth Look at the International Stockmarkets During 2005

The U.S. economy looks bleak while the world economy surges forward. Canada's TSX stock market soared 24% higher than 2004 figures, China continues to grow at a phenomenal rate and Egypt posts a stock market increase of 140% higher than 2004 figures. In the United States the New York Stock Exchange fell 0.5% compared to the same time in 2004. Economists blame the US dependency on oil and weak car sales for the weak economic performance in the USA.

The weak economic performance in the USA looks to be destined to continue for at least another three years. Under the Bush Administration, the cost of a barrel of crude oil has gone from $30 (all figures US) in December 2000 up to $62 in December 2005. The resulting chaos from 9/11, the wars in the middle-east and the poor response to Hurricane Katrina has resulted in the United States lagging heavily in terms of economy.

Meanwhile the Bush Administration is gearing up to go to war against Iran, claiming that Iran has nuclear weapons and needs to be stopped. These claims are currently unfounded, but like the "weapons of mass destruction" that were never found in Iraq, the Bush Administration is trying to prove its case for a possible war against Iran.

Meanwhile Alan Greenspan has retired and has pledged to write a book about US economics, which is certain to become a top-seller and a mandatory book for economics students in university. The book will be part theory, and part memoirs and will show how Greenspan balanced the U.S. economy, interest rates and the stock markets in order to maintain stability and growth. It will also show his lack of power compared to the economic might of the White House and the President and the difference between a president who makes good choices (like those made under former president Bill Clinton which resulted in a booming economy) and bad choices (like those made under current president George W. Bush which resulted in the current recession).

Indeed, in press releases Greenspan's biggest concern appears not to be the oil markets, but Chinese exports. China's economy has been growing strongly for eight years in a row, posting growth between 20 to 35% every year compared to the previous year. This is no surprise to a seasoned economist, money follows population. China is the population centre of the world, with roughly one out of three people living in China. It is therefore no surprise that it has become a manufacturing superpower and an economic boom has made it a domineering force on the global economy.

Greenspan warns that if the United States doesn't do more to curb Chinese imports into the United States, the US economy will become dependent on Chinese goods due to a lack of factories in America building the same products. The lack of factories and jobs for American workers is creating a "manufacturing gap" in the US economy, wherein the economy will eventually lead to a depression due to too much commercialism and not enough manufacturing.

Meanwhile in Canada, the Toronto Stock Exchange (TSX) has soared 24% over the same time in 2004. Why? A booming oil economy (Canada has some of the largest oil reserves in the world) and a strong manufacturing sector. Canada's manufacturing companies have posted record profits for 2005, largely due to a stronger Canadian dollar and exports to the United States. 38% of Canada's exports go to the United States, down from roughly 50% in 1995. During the last 10 years Canada has increased its exports to Mexico, Europe, China, Russia, Africa and South America, forming strong economic alliances with other countries.

Furthermore, Canada has an export surplus. They export more than they import, which results in a stronger economy. The United States in contrast has a trade deficit. They import more goods than they export, creating a dependency on foreign manufacturing. Canada's exports to the US are one example of how the United States has become dependent.

Egypt however is the surprising one. Its stock exchange closed its last day in December 2005 140% higher than December 2004. The economic investment in Egypt's companies has created a boom in the Egyptian economy and as a result a boom in northern Africa's economy. Why?

Well, there's many reasons... first off, Egypt has changed a number of their rules that govern their stock exchange. They now allow "Same-Day Trading". ("Same-Day Trading" was approved by Egypt's Capital Market Authority (CMA) allows the selling of securities traded that same day.) The new system was hailed by CMA chairman Hani Serri-Eddin, saying it would "benefit all parties involved, generate flexibility, and protect investors and activity for the broker."

Secondly, Egypt has privatized some of its public institutions (electrical power, etc), allowing public investment in stocks. The revenues from the privatization reached $5.6 billion in August 2005 (more recent data unavailable).

Thirdly, Egyptian money (Bourse) has gone up dramatically in value during the last several years (largely due to the war in Iraq and the lack of confidence in the value of Iraqi money). The stability and strength of Egypt's currency has created a demand for it.

Fourthly... "petro-dollars" have been spilling over into Egypt from neighbouring Arabic countries. Many Arabic countries had their own stock markets double in value during 2005. This is largely due to oil stocks and the current energy crisis facing the United States. The United States will run out of domestic oil reserves in 2008 and will become completely reliant upon foreign oil.

Lastly, outside investment in Egypt's stock market has increased to over $160 billion, bringing the total value of Egypt's stock exchange to over $450 billion.

So really its a combination of factors that have caused Egypt's stock market to more than double in value in one year. The 140% may be a bubble, and it could burst and cause a crash, but as long as countries like the United States and China keep demanding oil in vast quantities that bubble won't burst for a long time.

Meanwhile, Russia, Canada and Columbia have been experiencing economic gains due to oil and mineral speculation. The three countries have vast oil reserves and in the case of Canada and Russia, vast mineral reserves too. New finds of gold and oil in northern parts of Canada and Russia have created mini "gold rushes" and oil rushes. Investment in energy/gold companies in both countries have gone up at least 20%.

Oil stocks in the United States put up a strong front during 2005, gaining 14% in value, but that pales in comparison to the dramatic foreign gains in the Middle-East, Europe, Russia, Canada and Asia. Almost all the oil stocks across the globe gained in 2005, but the United States gained only 14% due to its weakening control of the oil market. The United States now owns less than 0.5% of the world's oil reserves and will completely run out of those reserves by 2008. The growing concern over when "the tap will run dry" in 2008 and what will happen to the U.S. economy as a result is making investors around the world very hesitant about investing in the doomed U.S. stock markets which look to be perched on the brink of a depression.

Some would argue that the United States had to attack Afghanistan and build that oil pipeline. Some would argue Bush didn't have a choice but to lie about WMD in Iraq and to force the war there in order to gain access to Iraq's oil supplies. Without Iraq's oil, the United States economy would probably collapse. Maybe.

History will unravel and the historians will decide whether Bush's "necessary evil" to gain oil reserves was necessary, or whether he was just acting upon greed. Or both.